12. Suppose that you sell short 500 shares of Intel, currently selling for $40 per share, and give your broker $15,000 to establish your margin account.

a. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Intel stock is selling at: (i) $44; (ii) $40; (iii) $36? Assume that Intel pays no dividends.

b. If the maintenance margin is 25%, how high can Intel’s price rise before you get a margin call?

c. Redo parts (

a) and ( b), but now assume that Intel also has paid a year-end dividend of $1 per share. The prices in part (

a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.